Chapter 4 · The Marketing Environment

Coach, Inc. is one of the well known American luxury brands and the company targets both women and men between the ages of 16 to 54. Although that is a wide age gap, Coach can allow itself to target such a larger range of consumers because each of their collections offers products to satisfy the needs of every shopper.

The company describes the quality of their products as "superior" and "durable", which is what shoppers today are looking for. If a product is and has proven to be reliable, durable, easy to use and maintain, from a trusted brand, and low in price, then consumers are more likely to buy it or purchase from the company again.

Coach believes in customer satisfaction, and since it is one of the top luxury brands in the world, it is safe to say that the company is a trusted brand name. Coach includes small booklets with each of their products that instruct the buyer on how to care for that specific item. Taking that into consideration, we can assume that the company does indeed offer reliable and durable products that are "superior in quality." With the great quality of their products, Coach does offer low prices, making it an "affordable luxury brand."

In the U.S., the company relies on its website, factory outlets, and department stores to sell their products but internationally, the company is opening up more full priced retail stores. As of late, Coach's major target market has been China, where 100 retail stores are now in operation. According to marketplayground.com, the "rebound in Chinese consumer spending will revive demand especially for affordable luxury brands such as Ralph Lauren Corp. and Coach, Inc." 

Coach Poppy
Left: 2009 -- Right: 2013

As mentioned in a previous post, Coach has maintained its price range but introduced a new line during the recession. Coach's successful attempt at introducing a new line during a time of economic instability serves as an example of the company's dedication to offer consumers a more affordable way to shop. A few years ago, Business Week dubbed the Poppy line as "luxury for recessionary times." The line offers handbags, shoes, and perfume. The collection is described as "vibrant", became a success, and has since expanded to not only symbolize youth and playfulness, but also edginess, sophistication, and "ladylike refinement."

 Sources: COACH_Luxury Goods, NYSE:COH

Chapter 3 · Ethics & Social Responsibility

"Integrity is at the heart of who we are. Integrity is at the heart of Coach as well."

Coach, Inc. seeks to be a good employer and a responsible and socially sensitive corporate citizen in the locations in which the corporation conducts business.

Coach's Global Business Integrity Program is made up of three documents that describe the ethical and legal responsibilities of all Coach employees as well as those who represent the Coach name.

The first document is the Global Business Integrity Program Guide that all Coach employees receive. The guide defines integrity as obeying the law, being honest, fair and trustworthy in business relationships as well as taking responsibility for your actions and their consequences. The guide also states that employees have the right to work in a safe environment, and that employees owe each other "honesty, respect and fair treatment." 

The second document is the Global Operating Principles, which outline the minimum standards expected from each strategic partner and how they will conduct business. In addition, the principles convey the company's values, commitments and goals. In the second document, Coach states that the company does not condone illegal payments, and that they company will not involve itself in activities that are "ethically questionable." Besides following all laws and regulations, Coach is also compliant with all environmental rules, regulations, and standards applicable to its operations. The corporation takes into account all environmental practices in all locations where the corporation operates.

Coach believes in having strong community relations, and encourages its operating facilities to be a part of the community. Coach has sponsored events such as the AIDSWalk New York, American Cancer Society's Daffodil Days, Arts & Business Council Annual Fundraiser, Dress For Success Clothing Drives, Holiday Toy Drives, Jacksonville Chapter of Dreams Come True, March of Dimes Walkathon, Meals-On-Wheels Annual Campaign, Miami Corporate Run to Benefit Leukemia, New York's Women Foundation Annual Fundraiser, and Thanksgiving Food Drives. Coach also seeks out opportunities to contribute money, products, materials, time, and expertise in order to make the community a better place.

The last document are guidelines for firms whom Coach receives products from because in order for Coach to maintain its reputation, it is important for the corporation and its suppliers (contractors, joint venture partners and suppliers of goods and services, including raw material suppliers) to behave ethically. "The global expansion of Coach's business activities into more countries and diverse cultures requires a commitment to the procurement of products and services in a manner which:

• is conductive to global good citizenship,
• will enhance the corporation's reputation and the image of the brand, and
• will ensure the achievement of Coach's commercial success."

"Coach's objective is to utilize the corporation's purchasing power to influence those from whom the corporation procures products and services to:

• embrace high standards of ethical behavior,
• comply with all applicable laws and regulations,
• treat their employees fairly, and with dignity and respect, so as to promote their welfare and improve their quality of life, and
• be socially responsible citizens in the countries and communities in which they operate."

Coach claims that they will only do business with companies who "share the corporation's commitment to the environment, and who pursue practices which conform to applicable environmental standards", and suppliers who don't comply with what Coach believes in are expected to develop and implement plans to correct their practices. 

Regarding employment practices, Coach will not do business with suppliers who:

• do not obey the legal maximum working hours of the country
• enforce child labor
• provide raw materials or finished products that have been produced by forced labor
• discriminate against employees
• use any type of corporal punishment or any type of mental or physical coercion

"The principles and philosophies that govern the operations and businesses of Coach are based not only on laws and regulations, but are also founded on dignity and respect for the individual, a strong commitment to common sense, fairness, diversity, and ethical business practices and policies. As Coach continues to expand its operations and businesses to more and more counties in order to effectively compete in the global marketplace, these fundamental principles will extend to all the corporation's locations with the aim of achieving Coach's mission: to build out brand worldwide while creating stockholder value. Coach is committed to the promulgation, application, and continued development of these principles at each location where it operates."

Sources: COACH Supplier Section Guidelines, COACH Global Business Integrity Program Guide, COACH Global Operating Principles, 

Chapter 2 · Strategic Planning for Competitive Advantage

"The company is founded on values such as customer satisfaction, integrity, innovation, and collaboration and seeks to be the leading brand of quality lifestyle accessories offering classic, modern American styling."

By developing a clear mission statement, Coach, Inc. is able to take the necessary steps to achieve their goal of being the "leading brand of quality lifestyle accessories."

Positioning itself as an "accessible luxury brand", Coach creates a demand for their leather goods by offering products for less than their competitors while providing consumers with impeccable quality and style. In addition, while companies like Louis Vuitton and Chanel focus on the very wealthy, Coach targets the higher and upper middle class consumer, which means that its products reach a larger consumer demographic.

Coach has outlined its strategy and has executed it successfully to help grow the business:

1. Raising its brand awareness and market share in the under-penetrated Asian market with China being the top targeted market
2. Growing its women's business in the North American and European markets
3. Increasing its men's business in North America and Asia 
4. Maximizing e-commerce sales

SWOT ANALYSIS

STRENGTHS:

• Strong brand presence in luxury market; number one brand of premium handbags and accessories in the U.S. market and ranked number 10 on the 2013 World's Top 10 Luxury Brands list
• Multi-channel distribution; offers products in store fronts, through their website, phone, factory outlets, and airports. 
• This wide geographical coverage allows the company to be the leading American marketer of fine accessories and gifts. 
• Coach offers products in over 20 countries.
• Coach has high operating margins and increased popularity, even in the struggling U.S. economy.

weaknesses:

Coach has a low inventory turnover rate, which could mean that Coach's target wasn't aware of the product, so there was either a deficiency in advertising, or that the products remained unsold for too long. The latter is costly for any company because the demand might not be as high as predicted, causing products to remain in the warehouse. 

opportunities:

Coach has taken advantage of the increased luxury consumption in China and plans to take more control over their retail operations by building their own stores rather than selling their products through third-party retailers.

threats:

Coach, Inc. is constantly pursuing counterfeit retailers. The increase in knockoffs diminishes the company's reputation for high quality leather goods, and Coach educates shoppers on counterfeit items on their website. 

marketing mix

product:

At Coach, "customer satisfaction is paramount" and the company wants to make sure customer needs are always met. Before a product is officially available, Coach surveys its target market to see how well it will do. When Coach packages its products such as boots or a handbag, the bag is stuffed with paper to help maintain its shape, and boots have a cardboard like paper placed inside to avoid creasing. A letter from Coach and care instructions can be found inside. 

Coach also gives you the option to gift wrap a product.* The gift boxes vary; some are red, with a long white ribbon tied around it. Others are white with a gold ribbon tied around, and some are striped.

*Note: The last time I ordered from Coach, I was able to gift wrap it for no extra cost.

Place:

Coach has a multi-channel distribution strategy, with over 500 stores located throughout the United States and Canada, with more to come. Over 400 stores are directly operated throughout Asia, and 20 in Europe. The company also offers products at department stores such as Macy's and Bloomingdale's.

PROMOTION:

Strategies for promoting Coach's latest collections include YouTube videos, and customers receive a booklet featuring the latest collection. A survey found that Coach utilizes the use of social media and the internet extensively, emailing over 1.2 billion messages to selected customers. 

The video is inspired by the poetic phrase for a daydream or reverie, Coach presents an atmospheric film about a day in New York—an otherworldly short starring new fall shoes that evoke the feeling of never touching the ground, and a cast of golden origami birds taking flight.

PRice:

While never really changing its price range, Coach does offer discounts to "Preferred Customers" and during the recession, rather than lowering the value of the products within already available collections, Coach introduced the Poppy line (which represents youth and playfulness) in order to offer consumers a more affordable way to pamper themselves.

---------------------------------------------------------------------------------------------

"In business, I look for economic castles protected by unbreachable moats." -Warren Buffett

In other words, Coach has competitive advantage in the luxury brand market because it offers high-end products with the same great quality their competition does, but for a lower price. As mentioned previously, Coach has a very strong brand presence in the market and "new competitors in the luxury brand industry would have to spend a large amount of money and resources to build up competitive brand awareness and image. Coach also has consumer loyalty as it has been delivering high-quality products that are simple and reliable, with a perceived value."

Coach has implemented it's strategic plan successfully in the past, evident by the 21% growth rate the company saw this year. In addition, Coach has a high gross margin of 74% and a net margin of 24%, showing Coach's position as a market leader.

---------------------------------------------------------------------------------------------

Sources: Financial Ratios, Stock (COH), COACH Counterfeit Education, NASDAQ_COH: Strategy and Value, Business Wire, SWOT Analysis, Coach, Inc.